Six months ago, warning signals were sent into the global economic landscape. At that time, oil prices climbed over $110 per barrel. Recently, the canary that once indicated trouble was reeled back up… but it did not survive. The broader economy may be the next to face the fallout.
As of yesterday, oil was trading around $59 a barrel, marking a staggering decline of over 45 percent in just six months. Such a drop undoubtedly qualifies as a market crash. Given that oil is the lifeblood of the global economy, this shift suggests that serious challenges are on the horizon.
This rapid plunge in oil prices is destabilizing the financial mechanisms that have been funding new exploration and production. A similar scenario unfolded several years ago when an unforeseen drop in housing prices sent shockwaves through the economy, severely damaging bank balance sheets.
If you remember, the collapse of Lehman Brothers a little over five years ago unleashed a wave of chaos on the global financial system. It was akin to black swans raining down on LIBOR, with bizarre and statistically improbable spread movements occurring daily. Continue reading
This year appears to be shaping up as a remarkable one for job growth. With a month left in the year, total payrolls have already seen an increase of 2.65 million—a surge like this hasn’t been witnessed since the turn of the millennium.
The Bureau of Labor Statistics released November’s employment figures last Friday, revealing an addition of 321,000 new jobs that month. Though the unemployment rate remained at 5.8 percent, economists and financial analysts greeted the news with enthusiasm.
“In a single sentence: spectacular and, importantly, credible,” commented Ian Shepherdson, chief economist at Pantheon Macroeconomics. “We’ve seen strong indicators in various surveys and decreasing jobless claims, so a blockbuster number was inevitable.”
Yet, one might argue that Shepherdson is overlooking a crucial aspect. His eagerness to hail a “blockbuster” number might have clouded his judgment, preventing him from seeing the bigger picture. Continue reading
Preventing Taxpaying Milk Cows from Seeking Greener Pastures
By Nick Giambruno, Senior Editor, International Man
It is clear that the window of opportunity is closing rapidly, especially when you connect the various dots and view the broader landscape.
To illustrate this point, it is essential to understand what makes being an American citizen uniquely burdensome.
Firstly, Americans are the only citizens globally who face an unavoidable system of worldwide taxation.
For instance, if both an American and an Italian relocate to Singapore (or any foreign nation) and earn income there, the American must continue to file and pay U.S. income taxes. In contrast, the Italian has no tax obligations to Italy. This is how most countries operate… except for American citizens.
The requirement for U.S. citizens to navigate a complex and often incomprehensible set of tax forms each year typically necessitates the assistance of costly tax professionals. Continue reading
In the realm of economic planning, authorities buoy the economy on a tide of credit. Financial markets rest precariously on a foundation of unstable, sandy debt. With so much illusory money circulating, solid ground is becoming increasingly rare.
At the Economic Prism, we yearn for a robust foundation that reminds us of reality. Experiencing the pain of stubbing a toe would be comforting, as it would affirm that consequences still exist. Thus, let’s begin today’s discourse with some insightful perspective.
“Credit expansion can create a temporary boom, but such fictitious prosperity inevitably culminates in a general economic decline,” remarked 20th-century economist Ludwig von Mises.
What happens, however, if this credit expansion is followed by even further credit expansion? Must the debt ever be settled? With sufficient credit-based money, can the economic downturn be postponed indefinitely? Continue reading
